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The Political Economy of Social Security

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  • Georges Casamatta
  • Helmuth Cremer
  • Pierre Pestieau

Abstract

We consider a two‐period overlapping generations model in which individual voters differ by age and by productivity. In such a setting, a redistributive pay‐as‐you‐go system is politically sustainable, even when the interest rate is higher than the rate of population growth. The workers with medium wages (not those with the lowest wages) and the retirees form a majority which votes for a positive level of social security. This level depends on the difference between the rates of population growth and interest as well as on the redistributiveness of the benefit rule.

Suggested Citation

  • Georges Casamatta & Helmuth Cremer & Pierre Pestieau, 2000. "The Political Economy of Social Security," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(3), pages 503-522, September.
    • Handle: RePEc:bla:scandj:v:102:y:2000:i:3:p:503-522
    DOI: 10.1111/1467-9442.00212
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    More about this item

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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